Zimbabwe diverts $2 billion in diamonds: gem watchdog

HARARE (Reuters) - At least $2 billion of diamonds from Zimbabwe's Marange fields have been stolen by people linked to President Robert Mugabe's party, a diamond watchdog has said, although the state mining firm said the gems were sold transparently.

Partnership Africa Canada, a member of the Kimberley Process initiative against "blood diamonds", said in its latest report that Marange diamonds have only benefited a well-connected elite and that the military had also been given mining concessions.

The Kimberley Process has certified Marange gems, but human rights groups have raised concerns about potential abuses at mines and Mugabe's opponents fear proceeds from diamond sales will be used to fund a war chest for elections expected in 2013.

"Conservative estimates place the theft of Marange goods at almost $2 billion since 2008," the group said in the report, which coincided with a start on Monday of a Zimbabwe diamond conference in the resort town of Victoria Falls.

Chairman of state-owned Zimbabwe Mining Development Corporation (ZMDC), Goodwills Masimirembwa, denied the theft charges on state radio on Tuesday.

"These are NGO attempts to derail Zimbabwe's diamond sales but it will not work. Where are they getting the $2 billion? And they should name these smugglers."

Diamond revenues have been a source of conflict within the coalition government formed by Mugabe and long-time opponent, Morgan Tsvangirai, now prime minister.

Finance Minister Tendai Biti, from Tsvangirai's party, has often accused the Marange mines of not remitting diamond proceeds to the Treasury.

ZMDC, which jointly operates mining companies in Marange, said last week the Treasury would only receive $150 million this year from the Marange mines, a quarter of the $600 million Biti had projected in his 2012 national budget.

The Marange area, 400 km (240 miles) east of Harare, has generated controversy since 20,000 small-scale miners invaded the area in 2008 and were forcibly removed by soldiers and police.

Human rights groups say up to 200 people were killed during the process, charges denied by the Zimbabwean government.

Former South African president Thabo Mbeki also called on Zimbabwe to bring more transparency to its diamond mining.

"Diamond production must not be governed by a predatory elite which is in collusion with mining companies for its own benefit," he was quoted as saying at the conference by South Africa's Business Day newspaper.

"As elections loom in Zimbabwe next year, the country must prove that it is not a rogue state."

The Kimberley Process was founded almost a decade ago with a mandate to stop so-called "conflict" or "blood" diamonds, gems used to finance rebel campaigns against U.N.-recognized governments.

The group, comprising governments, diamond miners and human rights groups has 50 members representing 76 countries, with the European Union counting as one participant. Members account for 99.8 percent of global rough diamond production.

(Reporting by MacDonald Dzirutwe; editing by David Dolan and Keiron Henderson)